Motives for Entrepreneurship: The Case of Lebanese Family Businesses

1. Introduction

1.1. Overview

Family businesses are the engine that drives socioeconomic development and wealth creation around the world, and entrepreneurship is a key driver of family businesses. The ability to build and keep the business running over generations is a major element of family business continuity and is influential in strategic execution, innovation, and growth. Entrepreneurial family businesses are a primary source of job creation (Shanker & Astrachan, 1996) in market economies where resources are allocated via supply and demand. In Lebanon, family businesses constitute 85% of the private sector, accounting for 1.05 million of 1.24 million jobs (Fahed-Sreih, 2006). The family unit is usually the only intact institution capable of sustaining entrepreneurial activities in Lebanon following civil war.

Lebanon provides a unique experiment where to explore entrepreneurship, family business, and SME development. Lebanese firms went through years of war and survived the massive destruction. Given the instability in the country in recent decades, it comes as no surprise that Lebanon has low scores when it comes to economic performance. Accordingly, researchers have a chance to spot, survey, and analyze the personality of new Lebanese entrepreneurs, the enterprises they are building, and family network involvement.

The general research question posed is: “What are the characteristics attributes, and growth orientations of Lebanese entrepreneurs and what relationships, roles, and contributions do family and culture play in the development of private SMEs?”

This study exploresfour dimensions shaping entrepreneurial characteristics and orientations: (a) the psychographic motives and demographic attributes of the entrepreneur, (b) the types of businesses being started, as well as their ownership structure and method of establishment, (c) family and enterprise relationships related to participation and influence including employment, investment, and advice, and (d) how family participation shapes and influences the growth intentions and expansion plans of Lebanese entrepreneurs.

By understanding how social forces affect entrepreneurial motives, we expect to find how culture influences and helps in starting a private enterprise. This study explores demographic aspects (age, education and experience), and how they help in starting a new business.

2. Entrepreneurship in a shaky economy

Since ancient times, Lebanese then called Phoenicians; Lebanon was the center of commerce In the Middle east region. The country was famous for its marketing skills and its educated inhabitants. Before the 1970s, Lebanon’s per capita income was similar to that of Southern Europe (Plamodon, 2004). This created a sophisticated consumer base, particularly in and around Beirut, Lebanon’s capital.

Twenty years of civil war damaged Lebanon’s infrastructure and cut its GNP output by half. After the war ended in 1991, Lebanon main source of income was tourism and banking. Following the September 11, 2001 attacks, Lebanon was seen as the secure place for the Arabs for deposits because of its banking secrecy and was no longer in war. Unfortunately, the assassination of Prime minister Rafic Hariri in February 2005 and afterward bombings major setbacks. Given its security crisis, Lebanon’s GDP growth in the first quarter of 2005 was zero (The Daily Star, 2005).

Israeli occupation from 1978 to 2000 and Syrian occupation from 1978 to spring 2005 have left Lebanon with enormous political and financial problems to solve, including physical and social infrastructural reconstruction. The unexpected 34-day Israel-Hizbullah war in July 2006 further distressed the Lebanese economy. The 34 days of fighting killed 1200 Lebanese, destroyed 15,000 homes, and cost the economy approximately twelve billion dollars (The Economist, 2006). The Israeli-Hizbullah conflict caused an estimated $3.6 billion in infrastructural damage during July and August 2006, and internal Lebanese political tensions continue to hamper economic activity (CIA, 2007). It is within this unstable framework wherein this study was undertaken.

3. The socioeconomic process of entrepreneurship and the role of the family

The family plays an important stabilizing role in social and economic value creation and trans generational wealth perpetuation processes (Habbershon & J. Pistrui, 2002).

Families play an important role during start-up and business development. This study assesses two general areas: 1) what is the direct role of family in the process of developing new venture, and 2) what is the direct role of family in the growth and expansion plans.

Family serves three major functions in its social system. First, it plays an economic role, (Steier, 2003) pointed out the substantial role that familial ties play in the entrepreneurial process, as the family represents a valuable repository of socio-economic resources. Family represents a learning element that teaches and passes on skills that encourage economic development. Secondly, family establishes a moral system, which helps the conduct of the unit. Finally, the family creates its own culture, in which family creates a motivating force that is central to private enterprise formation and enterprise preservation across successive generations.

4. Where are we from growth orientation, entrepreneurship, and family participation?

Dunkelberg and Cooper (1982) argue that growth orientation in and of itself represent an important entrepreneurial characteristic. Carland et al. (1984) suggest that planned growth is an important method of differentiating entrepreneurs from small business owners. This research intends to build on the work of Pistrui et al., (1997), Gundry and Welsch (2001), and Pistrui (2002) by advancing the understanding of how family participation and involvement affect growth orientations and expansion plans of Lebanese entrepreneurially led enterprises.

5. Lebanese culture, family dynamics, and business development

It is known in Lebanon and in the Arab world, that family business is a way to improve a family’s social standing (Fahed-Sreih, 2006, p.206). This special way of managing a business in Arab countries relates to the socioeconomic and cultural backgrounds of these families (Ali, 1993).

Usually succession is not openly discussed, older generation tend to keep in management, and refuse to give the power as long as they can stay in business. Lebanese family firms tend to exhibit perseverance, follow a path of self-reliance, and, despite the turmoil of war and destruction, express optimism (Fahed-Sreih, 2006).

sually it is difficult for researches to collect data in developed countries with transitional economy. Having survived harsh wars, occupation and ongoing uncertainty, Lebanese firms are unenthusiastic to fill surveys. Besides, most enterprises are very cautious in sharing details of their companies. To overcome these obstacles, personal interviews were required.

Drawing from the database of registered and active Lebanese entrepreneurially led enterprises on file with the Lebanese American University’s Institute for Family and Entrepreneurial Business, a series of 112 in-depth personal interviews was conducted over a twelve-month period between May 2006-07. The interviews took place at the business premises with the founder, president, or CEO. Interviewees were assured of complete confidentiality.

The Entrepreneurial Profile Questionnaire (EPQ) was utilized as a data collection instrument. The EPQ was designed to survey the effect of individual, societal, and environmental factors on entrepreneurship and family business development by collecting a combination of demographic information and extensive detail related to characteristics and orientations. The EPQ was successfully piloted and validated through a series of studies in Romania (Pistrui, 2002, Pistrui et al., 1997), Germany (Pistrui et al., 2003, Wintermantel, 1999), Venezuela (Pistrui et al., 1999), South Africa (Welsch et al., 1996), the United States (Gundry et al., 2001, ), and China (Pistrui et al., 2006). The EPQ has been independently validated as a valuable data collection tool in transition economies such as post-communist Eastern and Central Europe.

6. Lebanese entrepreneurial motives

In Table 1, the mean ratings of the top ten motive-based attributes were arranged in descending order, including the standard deviations. Given the fact that the attributes are not independent, a standard T-test of means was used to determine whether the overall mean ratings were different. Results verify that the attributes differ significantly in importance. The results suggest that Lebanese entrepreneurs are motivated by the need for independence and personal flexibility, family well-being, and the desire for high-income levels. Family security and family life also appear to be central motivating forces.

Item	Mean	(SD)
1. To be my own boss, to work for myself.	3.93	(.945)***
2. To make better use of my training or skills.	3.89	(.902)***
3. To give myself, my husband/wife and children security.	3.87	(.973)***
4. Desire to have high earnings.	3.87	(.893)***
5. To have greater flexibility in my personal and family life.	3.87	(.940)***
6. To achieve something and get recognition for it.	3.86	(.887)***
7. To make a direct contribution to the success of a company.	3.86	(1.036)***
8. To be able to develop an idea for a product or a business.	3.85	(.848)***
9. To control my own time.	3.85	(.859)***
10. To have the opportunity to lead, rather than be led by others.	3.84	(.924)***

Table 1.

Top Ten Reasons and Motives for Entrepreneurship.

N= 112; Range: 1-5 ***α = 0.001, **α= 0.01, *α = 0.05

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

Lebanese entrepreneurs are motivated to provide security and to generate the income necessary to create and protect a strong family life. This finding is consistent with the works of Melikian and Diab (1959, 1974), Barakat (1977), Diab (1980), Faour (1998), and Fahed-Sreih (2006), which document the family as the most important social entity among all social institutions in Lebanon. Lebanese entrepreneurs clearly have a unique set of motivational attributes when compared to other transition economies that have suffered socioeconomic turmoil.

7. Demographic profile: Business and work experience

Table 2 indicates the profile of our sample. The average age of our sample of Lebanese entrepreneurs is approximately 41 years old. Survey results suggest that entrepreneurship is not an exclusively male activity in Lebanon. Over fifteen percent (16.82%) of the entrepreneurs surveyed were women, which is similar to findings in China (Pistrui et al., 2006, 2005), Romania (Pistrui et al., 1997), and Hungary (Hisrich & Fulop, 1997). Furthermore, Fahed-Sreih (2006) points out that although men have historically dominated Lebanese culture, women are entering the work force and starting businesses.

Overall, Lebanese entrepreneurs have a high level of education. The vast majority have a college education, with women having about two years more education than men. It is clear is that Lebanese culture places great value on education and learning.

		Male		Female		Sign.
Category	Total	Mean	(SD)	Mean	(SD)	Diff.
Years of education	16.09	15.05	(3.56)	17.38	(1.82)	0.0264*
Years of business experience	15.51	17.17	(14.79)	5.80	(5.36)	0.0000***
Years of work experience	17.22	19.31	(15.04)	5.88	(5.99)	0.0000***
Age	41.41	43.29	(14.74)	31.19	(8.83)	0.0000***
Total	112	93		19

Table 2.

Demographic Profile: Business and Work Experience.

N=112 ***α = 0.001, ** α = 0.01, * α = 0.05

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

Lebanese entrepreneurs have an average of 17 years of work experience. As Table 2 shows, Lebanese entrepreneurs were found to have close to 16 years of business experience (15.51 years on average). Male entrepreneurs have over eleven years more business experience than females. This reflects the fact that it is only within the last decade that Lebanese women have emerged as an active entrepreneurial group. These findings suggest that Lebanon has a deep-rooted entrepreneurial class and an emerging new group of dynamic female entrepreneurs.

8. Family and enterprise relationships

The family is at the heart of the Lebanese society. Per Table 3, the family plays an important role in enterprise formation and development. These findings support the studies of Fahed-Sreih (2004), Wellman (2001), Sik et al. (1999), Poutziouris et al. (1997), and Pistrui et al. (1997 , 2002, 2006), which show that the family plays a central role in venture development in transitional economies that have experienced severe socioeconomic turmoil.

Question 1: How many family members are investors in your enterprise?

Question 2: How many family members are full-time employees in your firm?

Question 3: How many family members are part-time employees in your firm?

Question:	0	1	2	3	4+	Mean	(SD)
Question 1	20%	30%	19%	9%	7%	1.80	(1.60)
Question 2	30%	19%	25%	8%	2%	3.40	(14.30)
Question 3	53%	11%	18%	5%	3%	0.94	(1.25)

Table 3.

Family and Enterprise Relationships – Investment and Employment.

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

Eighty percent of the firms interviewed have one or more family members investing in the business. Further indication of the importance of family involvement in funding start-ups is the fact that 50% of the firms surveyed have more than one family investor, and 15% have over four. Family employees are also active in enterprise creation, development, and operation. 70% of the companies surveyed employ at least one member of the family on a full-time basis. Approximately 35% employ two or more family members on a full-time basis. In contrast, the majority of Lebanese enterprises did not employ family members on a part-time basis.

Employment is seen as a family’s obligation. Fahed-Sreih (2006) reported that there was a strong relationship between Lebanese families and their enterprises. Businesses are viewed as an extension of the family.

9. Type of business organization

The is 41% sole proprietorships, 37 % corporations and 20% limited liability companies (see table 4). These facts indicate that entrepreneurially led SMEs are closely held private enterprises built on family and extended family financial support.

10. Method of establishment

Type of Business Organization
Registered as:		Percent of Total
Sole proprietorship		41.00
Corporation		37.10
Limited liability company (LLC)		20.00
Partnership		1.90
Total		100.00
Method of Establishment
Technique	Percent of Total
Originate	52.34
Inherit	28.04
Purchase	19.62
Total	100.00
Business Activities of Lebanese Entrepreneurs
?Business activities	Percent of Total
1. Construction	24.30
2. Retail	17.76
3. Professional services	15.89
4. Computer/technology	14.02
5. Financial/insurance	11.21
6. Service organization	7.48
7. Transportation	5.61
8. Distribution	2.80
9. Manufacturer	0.93
Total	100.00

Table 4.

Business Organization and Activities of Lebanese Entrepreneurs.

N = 112

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

Slightly over half (52.34%) of the entrepreneurs surveyed originated their enterprises. As Table 4 shows, almost one third of these entrepreneurs (28.04%) inherited their business. This illustrates the strength of family within the entrepreneurial development of SMEs in Lebanon. Approximately twenty percent of respondents indicated that they purchased their enterprise. It would be interesting to know if they were purchased outright or from family members as part of a succession process.

The findings of this study suggest that Lebanese entrepreneurs are either creating new family enterprises or carrying on the family business as part of a succession process. The results of this study suggest that over 80% of the entrepreneurs surveyed are leading family businesses. It is evident that there will be an emerging need for succession and continuity assistance as these businesses mature and integrate additional family members into their operations.

11. Business activities of lebanese entrepreneurs

Following the post-war economy, the Lebanese entrepreneurs are supervising the rebuilding and development process, filling the voids and gaps, responding to the marketplace demand, and disrupting the geo-political grip imposed by Syrian and Israeli occupation. Three types of business activity, construction (24.30%), retail (17.76%), and professional services (15.89%), were found to dominate the sample (see Table 4). These three indexes represented well over half (57.95%) of those enterprises surveyed.

12. Family participation, growth Intentions, and expansion plans

The study focuses on how family participation in employment and financial investment, influence growth intentions and expansion plans of Lebanese entrepreneurs.

	Item	Mean (SD)
1.	Adding operating space.	3.88 (1.07)***
2.	Acquiring new equipment.	3.72 (1.01)***
3.	Selling to a new market.	3.71 (1.21)***
4.	Expand current facilities.	3.68 (1.12)***
5.	Expanding distribution channels.	3.65 (1.17)***
6.	Adding specialized employees.	3.64 (1.16)***
7.	Expanding advertising and promotion.	3.61 (1.04)***
8.	Researching new markets.	3.53 (1.05)***
9.	Redesigning layout.	3.52 (1.07)***
10.	Upgrading computer systems.	3.50 (1.05)***
11.	Adding a new product or service.	3.49 (1.23)***
12.	Replace present equipment.	3.47 (1.11)***
13.	Computerizing current operations.	3.47 (1.06)***
14.	Expanding scope of operating activities.	3.41 (1.13)***
15.	Redesigning operating methods.	3.30 (1.14)***
16.	Offsite training for employees.	3.28 (1.20)***
17.	Seeking additional financing.	3.18 (1.22)***
18.	Seeking professional advice.	3.16 (1.18)***
	***α 0.001 **α 0.01 * α 0.05	N = 112 Range 1-5

Table 5.

Growth Intentions and Expansion Plans.

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

The growth model was developed, tested, and confirmed the validity of a growth model based on entrepreneurs’ intentions to implement specific attributes associated with market expansion, technological upgrades, and operation/production expansion. Based on this research, we hypothesize that family participation in the business has a positive impact and encourages entrepreneurial growth intentions and expansion plans. Growth intentions and expansion plans were measured along eighteen items as presented in table 5.

13. Structural equation modeling

The research model was tested using covariance–based Structural Equation Modeling (SEM). The evaluation on the measurement model includes an exploratory factor analysis to identify the constructs and examine the convergent and discriminant validity of the research instrument. The evaluation on the structural model consists of estimation of path coefficients and their associated significance p-value. Squared multiple correlations (SMC) are calculated to know the proportion of explained variance in the each construct. Finally, the evaluation of the overall model is on the overall goodness-of-fit for SEM.

SEM is a powerful multivariate technique that facilitates the testing of psychometric properties of the scales used to measure unobserved variables (constructs) as well as estimate the parameters of a structural model, which is the magnitude and direction of the relationship among the model variables (Bollen 1989, Genfen et al. 2000, Hair et al. 1998). SEM embodies two interrelated models. The measurement model represents the relationships between the observed items and their constructs measured by these items, while the structural model represents the paths among a set of dependent and independent variables.

14. Assessment of the structural model

The structural model shown in Figure 1 provides the hypothesized relationships between Family Participation (FP) and the growth constructs. As previously discussed, we hypothesized that Lebanese cultural traditions encourage family participation. This in turn has a positive impact on entrepreneurial growth intentions and expansion plans. Thus, we will further define and dissect the specific types of growth constructs and how FP affects these subsets. The hypotheses were tested by SEM, using the input model in AMOS (Analysis for Moments Structures), as shown in Figure 2. The Maximum Likelihood function was used to estimate the model parameters.

15. The impact of family participation, growth intentions and expansion plans

Family participation in the business has a positive impact and encourages the entrepreneurial development and expansion. Participation of the family in employment and investment, revealed to be encouraging too. These findings conclude that new emerging family businesses tend to expand and grow which lead to witness a transition from war and foreign occupation to an open market economy.

Six specific growth constructs have been identified and validated in these entrepreneurially led family enterprises. Using AMOS 5.0.1, we obtained the results presented in Table 6. For example, the squared multiple correlations (SMC) of 0.526 in H1 reveal that FP explains 52.6% of variance in EU. The path coefficient in H1 is 0.756. All paths are statistically significant at the 0.001 level.

Hypothesis	Testing the relationship between	Squared Multiple correlation	Standardized regression coefficient	p-value
H1	FP has a positive impact on EquipUpg	0.526	0.725	***
H2	FP has a positive impact on BusDev	0.761	0.872	***
H3	FP has a positive impact on OpExp	0.484	0.695	***
H4	FP has a positive impact on ITUpg	0.408	0.639	***
H5	FP has a positive impact on MktExp	0.508	0.713	***
H6	FP has a positive impact on MktDev	0.662	0.814	***

Table 6.

Summary of the Parameters for the Research Model.

*** denotes p<0.001

Source: Family and Cultural Factors impacting Entrepreneurship in war time Lebanon, (Fahed-Sreih et al, 2010)

16. So what- practical implications for entrepreneurs and policy makers

Lebanon represents both unique opportunities and challenges to enterprises large and small. There are many emerging opportunities to work with Lebanese entrepreneurs both at home and abroad. This research provides helpful insights that have sensible applications for entrepreneurs and businesses in general.

17. Conclusion

This study was made on a small sample of Lebanese entrepreneurs in a traumatic post-war economy. Although it shows part of the Lebanese society, it provides one remarkable caution and distrust permeating Lebanese society. The insights provided in this research mark a rare and in-depth examination into the engine driving the reconstruction of the post-war economy, with family participation serving as a strong component.

This study highlights the vital need for the Lebanese government to support the Lebanese companies with financial resources, services and create innovative programs. This is critical for the growth of new businesses, as well as the continuity and succession of larger, more established companies.